Home prices continue to climb in North County

NORTH COUNTY -- San Diego County's chronic shortage of resale
housing continues to push up the median price of existing homes in
North County.

Since January, the median price of an existing detached
single-family home in North County has risen 5.8 percent. That
represents an annualized price jump of nearly 35 percent, according
to figures released Monday by the San Diego Association of
Realtors.

That median price for March was $529,000, up from $500,000 in
January.

But statistics of that sort can be misleading, says Elaine
Worzala, research director of the Realo Estate Institute at the
University of San Diego.

"There could be one or two houses with very high prices that
skew the median," Worzala said.

She also said that buyers and sellers alike would be making a
mistake if they interpret the dramatic statistics to apply to a
home that they want to buy or sell.

"You have to look at each micro-market," Worzala said.

"One of the things I try to teach my students is that the median
is an indicator, but it's not necessarily what's happening in your
micro-market," she said.

Medians, like averages, can be distorted by individual examples
of extraordinarily high or low prices. The distortion is even
greater if the number of homes sold is relatively low, giving added
weight to individual sales.

"We are at historic lows," Lorrie Mowat, director of
communications of the Association of Realtors, said of the number
of houses being sold.

When she began compiling and publishing sales data for the
association more than three years ago, she said, she typically saw
"7,500 listings a month; now it's 3,000."

"Prices keep going up, the number of active listings keep going
lower, and the number of days on market are just almost unheard of
they're so low," Mowat said.

"It's a frenzie," association President Karen Peterson said of
home sales.

"We had it a while back, then it calmed down a bit," she said.
"But we've gotten back into it again."

"You always have to worry about cooling," said Worzala.

"North County is one of the most sought after areas, so it will
have higher appreciation," Worzala said. But she warned that
housing sales are very dependent on interest rates, and rising
rates could put a decided chill in the market.

"What talks to you the most," she said, "is a property that has
sold twice."

According to Worzala, price escalation is a judgement call when
comparing different properties, but tracking a single property in a
1- to 3-year period as it is bought, then sold by a single owner is
an accurate measure of the increase in real estate value --
assuming that no major additions or renovations are made to the
property.

One of the issues facing the real estate industry in North
County is the lack of homes to sell. With fewer homes in inventory
than in prior years, real estate agents complain they have limited
opportunities for business growth. On the other hand, homes don't
linger long on the market these days, so the agent's real struggle
is to find listings, not to make sales.

"The bottom line is supply and demand," said Peterson.

"It's hard on experienced agents who know how this works, and
it's really hard on new agents," she said.

"I know top agents who normally have an inventory of 20 or more
properties but who maybe have two or three today," Peterson
said.

"Advertising is advertising; it's supposed to make the phone
ring. But what if you don't have anything to sell to the person who
calls?" she said.

"Underneath that is another question: If a seller is selling,
where's he going to buy?"

The idea that rapidly escalating housing prices ultimately drive
down the number of sellers because they can't afford the
replacement cost for their homes has an appeal to Worzala, who also
is a real estate professor at USD.

"You can't just sell and then go buy," she said.

"You wouldn't want to do it that way. You'd have to make a
decision to go rent for a while and wait for the market to cool
off," she said, arguing that in a real estate market with short
supply even selling your own home can drive up the price of the
home with which you intend to replace it.

According to the association, the number of homes sold in the
county in March dropped about 3 percent from a year ago: 515
attached homes and 1,199 detached homes.

Just more than 2,900 detached and 1,300 attached homes have been
sold in North County this year with an aggregate price of $2.3
billion. The median price of detached homes sold in North County in
2004 is $515,000. Attached homes had a median price of
$325,000.